AUSSIE BONDS: Moderately Richer, July Rate Cut At 95% After CPI Data
Jun-25 05:10
ACGBs (YM +2.0 & XM +2.5) are trading modestly stronger.
- May headline CPI inflation was flat on the month, driving a 0.3pp moderation in the annual rate to 2.1% driven by a broad-based easing across major components. The trimmed mean moderated to 2.4% y/y from 2.8%, the lowest since November 2021. However, CPI ex volatile items and holiday travel was only down 0.1pp to 2.7% y/y. The RBA decision is on July 8 and this data is likely to increase expectations of another rate cut but the Board prefers the quarterly CPI (due July 30) and updated staff forecasts are not provided until August.
- Cash US tsys are modestly mixed in today's Asia-Pac session after yesterday's modest gains.
- Cash ACGBs are 2bps richer with the AU-US 10-year yield differential at -16bps. At -16bps, the differential is positioned in the bottom half of the +/- 30bps range that has held since November 2022.
- The bills strip has bull-steepened, with pricing +1 to +7.
- RBA-dated OIS pricing is softer across meetings after today’s data. A 25bp rate cut in July is given a 95% probability (84% pre-data), with a cumulative 83bps of easing (78bps pre-data) priced by year-end.
- Tomorrow, the local calendar will see Job Vacancies data.
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JGBS: Modest Bull-Flattener, PPI Tomorrow, 40Y Supply On Wed
May-26 05:02
JGB futures are stronger, +31 compared to the settlement levels, after recovering much of the losses seen earlier in the session. Futures had closed Friday’s overnight session at +56.
- US equity-index futures have climbed in early Asian trading after President Donald Trump extended a deadline on aggressive European tariffs. Trump agreed to delay the date for a 50% tariff on goods from the European Union to July 9 from June 1.
- US tsy futures (TYM5) have weakened in today’s Asia-Pac session, with TYM5 at 109-27, -0-07+ from closing levels. Cash US tsys are closed today for Memorial Day.
- “Neel Kashkari said major shifts in US trade and immigration policy are creating uncertainty for the Fed to move on interest rates before September." (BBG)
- (Bloomberg) - "Long-term Japanese yields are set to climb further with JGB traders facing a 40-year debt auction, followed by Tokyo inflation data this week." (per BBG)
- Cash JGBs are 1-3bps richer across benchmarks with a flattening bias. The benchmark 30-year yield is 3.0bps lower at 3.023% versus the high of 3.204%. It was as low as 3.0% earlier in the session.
- Swap rates are 1-3bps higher with a flatter curve and swap spreads are wider.
- Tomorrow, the local calendar will see PPI data ahead of 40-year supply on Wednesday.
FOREX: Asia FX Wrap - USD Struggles Across The Board
May-26 04:59
The BBDXY has had a range of 1207.08 - 1211.08 in the Asia-Pac session, it is currently trading around 1208. President Trump agrees to an extension to July 9 for Europe. https://x.com/TrumpDailyPosts/status/1926778871442972759. The EU is ready to advance talks and needs until July 9 to reach a good deal, Ursula von der Leyen said on X. https://x.com/vonderleyen/status/1926729529436913794.
- EUR/USD - Asian range 1.1363 - 1.1419, Asia is currently trading 1.1410. EUR has traded higher and remained bid throughout the Asian session. What stood out from the price action on Friday was how well the EUR held up in the face of a potential 50% increase in tariffs, and it was again the USD that took the brunt of the impact. This clearly shows the market's current outlook and leans into the growing “sell America “ theme.
- GBP/USD - Asian range 1.3524 - 1.3593, Asia is currently dealing around 1.3580. The GBP is breaking the Pivotal Weekly Resistance in the 1.3500 area, I would be weary considering it is in thin liquidity on an Asian Monday morning, with a US and European holiday. A sustained break though would signal a potential acceleration of the trend higher.
- USD/CNH - Asian range 7.1616 - 7.1824, the USD/CNY fix printed 7.1833. Asia is currently dealing around 7.1690. Sellers should be found on a bounce back towards the 7.2200 area again. Andreas Steno Larsen on x : "The elephant in the room USDCNH needs to go to 6.80 at least. https://x.com/AndreasSteno/status/1926115935200440525"
Cross asset : SPX +1.07%, Gold $3350, US TYM5 109-27 , BBDXY 1208, Crude oil $61.76
Fig 1: GBP/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg
MNI EXCLUSIVE: Insights Into UK-China Trade Relations
May-26 04:56
A leading British business leader in China shares insight into UK-China trade relations. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
